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March 29, 2010

FT: How to create a chart-topper

How to create a chart-topper

By Andrew Edgecliffe-Johnson

Published: March 24 2010 23:24 | Last updated: March 24 2010 23:24

There was dog food in the gift bags at this year’s Grammy Awards, and a dead man has just struck the biggest record deal in history. A decade after Napster began demolishing its profit margins, the music industry is still struggling to adjust to more straitened times. Its online missteps, from suing downloaders to letting Apple’s dominant iTunes store dictate pricing, are so well charted that few outsiders would look to the music business for case studies in how to market their products in the digital economy.

Last year’s charts again spelled out record labels’ dependence on television talent show winners such as Susan Boyle and stars of a more lucrative era such as Michael Jackson, whose estate just signed a $200m-plus deal with Sony Music.

In the past year, however, two acts have emerged that are giving label executives hope that they have not lost the ability to break new talent, and that also offer broader lessons about the power of digital marketing.

Lady Gaga, signed to Universal Music, and Ke$ha, on Sony’s RCA Records label, are vying to be the heirs to a pop throne not yet vacated by Madonna, while firing up digital communities of fans in a way that was impossible 20 years ago.

There are differences between the aloof artistry of Stefani Germanotta, Lady Gaga’s real name, and the raunchy and boozy lyrics of Kesha Rose Sebert, but both have achieved global, digital fame thanks in large part to online word-of-mouth of which brand managers dream.

“Eight months ago no-one knew who this girl was. Now she’s the hottest star in the world,” says Barry Weiss, who last year signed Ke$ha, a 23-year-old who grew up in Nashville. “Ke$ha’s going to be this year’s Halloween dress-up [costume]. Last year it was Gaga. Ten years ago it was Britney [Spears]. That’s how big this feels.”

Music videos make a comeback

Long before the YouTube generation usurped the MTV generation, the music video had become known as a loss-making luxury. Now, thanks to the internet, the music video is coming back into its own.

Ke$ha’s “Tik Tok” and the elaborately produced video for OK Go’s “This Too Shall Pass” have become viral hits, with 11m and 9.5m views respectively on YouTube. The “official explicit version” of “Telephone”, Lady Gaga’s controversial nine-minute production, has notched up 22.6m views so far on Vevo, the site launched by Sony Music and Universal Music with YouTube to provide a premium destination for their videos.

According to Barry Weiss, such traffic drives revenues. “It’s penny rates, but the Ke$ha videos will make a lot of money on streams,” he says. Sales of her single got “a big bump” when iTunes featured “Tik Tok” as its free video of the week, he says, but Ke$ha fans have also paid for 100,000 video downloads on Apple’s online store.

Mr Weiss, who runs Sony’s RCA/Jive label group, has watched Ke$ha’s debut single, “Tik Tok”, top the US charts for nine weeks. She has sold 6m iTunes downloads in the US and 2m internationally, and about 1m mobile ringtones and ringbacks round the world. Her debut album, Animal, has sold 1m copies, a “staggering” 50 per cent of them in digital form, says Mr Weiss.

Ke$ha’s appeal is to a hard-partying young crowd more interested in their smartphones than the CDs of Boyle’s older market. As Mr Weiss put it: “18-22-year-old girls and women are getting on the bar in Milwaukee when “Tik Tok” comes on. This is their song.”

Ke$ha came to RCA through Lukasz Gottwalk, or Dr Luke, the pop producer who gave her a break providing vocals for a 2009 hit called “Right Round” by Flo Rida. When RCA began negotiating for a multi-album deal, it was struck by her strong social media following. Once the label had settled on “Tik Tok” as Ke$ha’s first single, it gave it away from July on MySpace as a free stream more than a month before it was due to go on sale on iTunes.

For Mr Weiss, such viral marketing felt familiar. “It was the Britney playbook from 1998-99,” he explains. At that time, the Jive label had been dominated by rap artists but when Spears began her career, Mr Weiss says they “applied street marketing methodology to pop music” by giving out cassette singles of “Baby One More Time” as a young Britney toured shopping malls.

After spreading virally, “Tik Tok” hit iTunes on August 25. Within a week, it had sold 610,000 downloads in the US alone, breaking digital records for a female artist, and soon spread. “We knew “Tik Tok” would be an enormous hit when it broke at number one on iTunes New Zealand with no radio play,” says Mr Weiss.

Radio stations closely watch iTunes, which has sold 10bn songs to date, and calls poured in to Sony from stations round the world, but their interest prompted Mr Weiss to delay his radio launch plans by a month, to mid-October.

Even now, “radio is still the only way you really sell a record”, says Mr Weiss, but his gamble was to heighten the song’s radio impact by letting awareness build online.

Finance executives eager for a hit for the Christmas quarter questioned the decision, and Mr Weiss admits that, when “Tik Tok” was eventually released to stations, “it didn’t explode as the promo guys thought it would”.

The radio play was enough to pave the way for an album release in early January.

“January is dead. There’s no way we would have had the number one album [in the run-up to Christmas]. It would have got lost in the sauce,” admits Mr Weiss.

Other artists, from Lily Allen to Jack Johnson have had viral digital success, but “too often you see their [digital] phenomena pop up and there’s no foresight into how to catch that in a sales net,” says Bill Werde, editorial director of Billboard, the entertainment industry magazine.

In Ke$ha’s case, ”the brilliant part” was Sony’s decision to make her album available for pre-sale on iTunes just after Christmas, when new iPod and iPhone owners want to load up their presents with music or spend iTunes gift cards. “They played it perfectly,” Mr Werde says, ”but it helps that “Tik Tok” is an amazing song.”

Animal instantly bumped Boyle’s record off the top of the US chart and sold 152,000 copies in a week.

Unusually, at a time when many worry whether the album format can survive in the digital era, almost three-quarters of Animal’s sales were via iTunes.

Sony priced the album at just $6.99, before raising the price to $9.99 once it saw the pace of sales. “$7 gets kids interested in the artist, so ultimately [she] can have a 10-year career,” Mr Weiss says.

With fans able to buy only their favourite tracks, however, digital albums help point labels to their next single. At the end of Animal’s first week on iTunes, Sony could see that a track called “Blah Blah Blah” was selling almost as well as “Tik Tok”.

“That picked the single for us,” says Mr Weiss.

Ke$ha is now busily promoting her album, with events ranging from a “secret show” in London sponsored by MySpace to performing on American Idol.

Mr Weiss is already calculating how his new digital phenomenon will compare to Spears, a star from the cassette era. “Britney went on to sell 20m [copies of her first album]. We’re not going to do that... But we’re going to do 5m [sales of the Tik Tok single] in America alone and we’ll probably do 8m-10m worldwide.”

A decade ago Jive made $60m-$75m from Spears’s first album, he estimates. “On Ke$ha hopefully we’ll make $15m-$20m.”

Mr Weiss’s father, Hyman “Hy” Weiss, founded a 1950s doo-wop label. “The business hasn’t changed since my father’s day. It has, but it hasn’t,” he says. “One hit used to cover 10 misses. Now it only covers one.”

Even with such digital success stories, the industry is still a long way from its profitable peak. “You can still make money in the music business with hit content. You’re just not going to make the money you used to make.”

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